Amity School of Business

Amity School of Business

BBA IV Semester Marketing Management II

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PRODUCT LIFE CYCLE

STAGES & STRATEGIES

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Popularized by Theodore Levitt, 1965 PLC can be applied to: Product category (Watch) Product style (Digital) A product item/brand (Timex)

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To say that a product has a life cycle is to assert four things: Product has a limited life Product sales pass through distinct stages, each posing different challenges, Opportunities, and problems to the seller Profits rise and fall at different stages of the product life cycle Products require different marketing, financial, manufacturing, purchasing and HR strategies in each stage

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Sales and Profits (Rs) Sales

Profits Time Product Development Losses/ Investments (Rs) Introduction Growth Maturity Decline

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INTRODUCTION STAGE Its a period of slow growth rate Profit is low or negative Promotional expenditure are high Prices tends to be high because costs are high

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Strategies that can be pursued: Rapid skimming Slow skimming Rapid promotion Slow penetration Pioneer advantage

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GROWTH STAGE

The salient features of the growth stage are: 1. Rapid climb in sales. 2. New competitors enter the market and introduce new produc thereby expanding distribution. 3. Prices almost remain the same. 4. Promotional expenditures remain the same. 5. Decline in Promotion-sales ratio. 6. Profits increase because of promotion. 7. Unit-manufacturing cost falls.

Strategies used at this stage

:

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Sustain rapid market growth through 1. Improves product quality. 2. Add new features. 3. Enter new segments. 4. Increase distribution coverage. 5. Lower price to attract buyers.

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MATURITY STAGE
The salient features are: 1. Sales growth will slow down. 2. This stage lasts longer. 3. Challenges to marketing management. 4. Overcapacity because of sales slow down. 5. Intense competition because of point 4 6. Increase advertising and R&D budgets. 7. Weaker competitors withdraw from the market. 8. Basic market drive is to increase market share. 9. Abandon weaker products and concentrate on profitable products.

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MATURITY STAGE
Strategies A) Market modification B) Product modification and C) Marketing mix modification

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A) Market modification: Now in order to expand the market volume the company follows the strategy formulated as Volume = number of brand users x usage rate per user
Expand the number of brand users by Trying to convert nonusers. Enter new market segments. Win competitors customers.

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Expand Volume by Get the new customers to increase the usage. Interest users to use more of the product on each occasion. Try to discover new product uses and then convince people to use them.

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B) Product modification: This can be done through 1.Improving quality This basically aims at increasing the products functional performance through durability, reliability, speed and taste.

2.Feature improvement Amity School of Business This aims at adding new features like size, weight, additives, accessories etc., this expands products versatility, safety and convenience. Advantages of the strategy: a) Builds companys image. b) Win loyalty of market segments. Disadvantage: a) Feature improvements are easily imitated. b) Needs first mover advantage. 3.Style improvement. This aims at increasing the products aesthetic appeal.

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) Marketing mix modification This is done through asking question on certain marketing mi a) Prices: Would a cut attract new customers? Is it better to raise price to signal quality? b) Distribution: Can more outlets be penetrated? Can the company obtain more market support? c) Advertising: Should the expenditures be increased? Should the media mix be changed?
C

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d) Sales promotion: Should we set up sales promotion? e) Personal selling: Should the number or quality of sales people be increased? Can we improve sales planning? f) Services: Can the company speed up the sales delivery. Can we extend more credit?

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Characteristics Sales Costs Profits Customers Competitors Marketing Objectives Introduction Low Sales High -ve Innovators Few Create Product Awareness and trial Growth Rising sales Average Rising Early Adopters growing Maximize market share Maturity Peak sales Low High Middle Majority Stable Maximize market share while defending profit Decline Declining sales Low Declining Laggards Declining Reduce expenditure and milk brand.

Strategies Product

Offer a basic product

Offer product extensions, Diversify brands and service, warranty items.

Phase out weak models

Price

Charge cost-plus

Price to penetrate market Price to match or best competitors Build intensive distribution Build more intensive distribution system

Cut price

Distribution

Build selective distribution

Go selective: phase out unprofitable outlets

Advertising

Build product awareness among early adopters and dealers Use heavy sales promotion

Build awareness and interest in the mass market.

Stress brand differences and benefits

Reduce to level needed to retain hard core loyal

Sales promotion

Reduce to take advantage Increase to encourage of heave consumer brand switching demand

Reduce to minimal levels.

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DECLINE STAGE
Profits erode (destroyed) Intense price cutting and many more products are withdrawn from the market Profits can be improved by reducing marketing spend and cost cutting

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LIMITATIONS
PLC critiques: 1. The life cycle patterns are too variable in their shape and duration. 2. PLC lacks what living organisms have- namely, a fixed sequence of stages and a fixed length of each stage. 3. A product may appear mature when it has only reached a plateau before up-surge.